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FROM A TECHNICAL PERSPECTIVE, something very important happened in the stock market over the past week. Key support levels on all major indexes have been broken to the downside. Whether you think the economy will rebound or not, the stock market is signaling that the pain is not over.

To be sure, after the losing streak the market has had since late last month, there are a few reasons why prices can rebound in the short term. One of them comes from momentum indicators, such as the relative strength index, that show selling pressures have let up a bit despite the trip to new multimonth lows.

But just because there are reasons to go up or down does not mean the market will oblige. Just last August 16, when the lid blew off the subprime crisis, the Dow Jones Industrial Average plunged more than 300 points intraday in what looked like a major breakdown (see Chart 1). The bull market appeared to have been broken.

Chart 1

Fear levels soared and the Chicago Board Options Exchange volatility index (VIX) rose above 37, a level last seen during the bear market in 2002. But when sentiment indicators such as the VIX move to extreme levels of negativity the market usually bottoms. Theoretically, if "everyone" is bearish then there is nobody left to sell and no supply to satisfy even the slightest uptick in demand.

Such was the case in August 2007. Contrarians started to buy at the lows of the day to erase the entire decline, and the next day the Federal Reserve cut the discount rate by half a point in a surprise move. Stocks were off to the races and on to a new all-time high within eight weeks.

That was then and this is now. With the Dow trading below its August 16 closing low of 12,846, it would seem that conditions are once again ripe for a bottom. But this time the fear element normally accompanying bottoms is missing. The VIX hit 25 Tuesday -- a far cry from its peak last August. It is also well below the 31 it hit as the market troughed in November.

Last week, I discussed how the pause of 2007 was different from other pauses seen since the bull market began in 2003, adding, "For the first time, big selloffs are not being followed by sustained rallies." (see Getting Technical, "The Technical Setup for 2008," Jan. 2).

As mentioned, the rally from the August low lasted eight weeks; prices rolled over to head back down. The rally from the November low lasted two weeks and could not get close to setting new highs -- this is not how previous pullbacks acted. With the Dow still falling, it has notched a lower low to go along with its lower high to meet the classic definition of a declining trend.

Where will it all end? I am not going to make a prediction but using a simple measuring technique we can get an idea of magnitude. In round numbers, the 2007 trading range was between 12,800 and 14,100. Chart watchers take that height -- 1300 points -- and project that down from the breakdown point. The result is 11,500, a level last seen in early 2006.

That is certainly not the end of the world although it will do a number on investor portfolios and attitudes. It also does not prohibit a strong rebound in the latter half of the year to turn red ink into black. But let's get through the first half of the year before thinking that far out into the future.

As always, every analysis must include a look at what has to happen to prove the conclusions to be wrong. Excluding outside influences, such as a massive rate cut by the Fed or making nice with our enemies, the technical proof that the decline from all-time highs was corrective -- and not the start of a new bearish trend -- will be a move back above 13,400 (see Chart 2).

Chart 2

A trendline drawn from the October peak through the December high is now the technical feature to watch. If in a few weeks the Dow can move above 13,400, then I will have to concede that this month's breakdown was a false signal and that new highs would be in the cards. This is a bit different than what I wrote last week, looking for a new high above October's all-time high of 14,198, because last week the trading range was not broken. Now it is.

I'd like to wrap it up with a quick look at the Standard & Poor's 500 since it is the benchmark against which most money managers are judged. Many analysts are still looking at this index as holding above its long-term trendline and technically still in a bull market (see Chart 3).

Chart 3

I disagree with the conclusion, mainly because the trendline as seen in the chart has not accurately reflected the action since July 2006. In other words, I am looking at a different pattern to tell me if the bull market is over or not. What I see has several interpretations from a "double top" to a complex form of "head-and-shoulder" with a double "head." No matter what the jargon, the pattern has broken down.

Using the same technique to project a target as we did for the Dow, it looks as if the S&P 500 can head to 1250, also a level not seen since 2006.

The bottom line is that the bull market is over. A bear market is not necessarily the next step but at this point, barring outside influences, the stock market has a lot of healing to do before it will be strong enough to sustain another leg up.

Getting Technical Mailbag: Send your questions on technical analysis to us at online.editors@barrons.com. We'll cover as many as we can, but please remember that we cannot give investment advice.

Michael Kahn, author of three books on technical analysis, former Chief Technical Analyst for BridgeNews and former director for the Market Technicians Association, also blogs at www.quicktakespro.com/blog.